SA business stays invested in Zim

There is a significant South African business presence in Zimbabwe. About 27 of our biggest listed companies have operations there, and a number are also listed on the Zimbabwe Stock Exchange. Some of these are its top performers.

Strong economic ties were maintained despite the often mismatched political dispensations on either side of the border. Zimbabwe was, until recently, South Africa’s most important trading partner in Africa, and one of the 15 countries globally with which South Africa exchanges the highest volume of trade.

Local companies operating in Zimbabwe continued to find ways to deal with the country’s distorted and largely dysfunctional economy in order to maintain a presence there in expectation of eventual political change and economic recovery.

The main findings of research conducted into the experiences of companies operating in, and doing business with Zimbabwe include:

  • Long-standing business ties have not been severed by the current economic problems, although many companies have preferred to ring-fence their Zimbabwe operations, keeping financials separate from the overall group operations, as a way of riding out the storm.
  • The government’s erratic policy decisions, and the resulting hyperinflationary environment, has made doing business difficult because it precludes long-term planning and forces companies to revise salaries and other costs on a monthly or quarterly basis.
  • The issue of wages has become complex and administratively difficult owing to the need for regular inflation adjustments and the fact that companies have to negotiate an annual increase for their workers with the national employment councils separately.
  • Foreign currency shortages are a critical problem for companies, which often have difficulty obtaining dollars. Yet, a number of companies say the percentage of the export earnings they are allowed to keep in foreign currency accounts (which changes regularly, as the government’s economic policy twists and turns) covers their import needs. Although a number of South African companies have made good returns on the stock exchange, many do not repatriate dividends because of the foreign currency shortages.
  • The role of the Reserve Bank has become increasingly unclear. It has assumed several functions that put it in competition with the banks, causing confusion.
  • Some companies’ products are subject to the government’s price controls. This has made the products unviable as they are required to pay market-related costs for inputs, but are not allowed to charge market-related prices for the goods produced.
  • The declining skills pool — as a result of massive migration and the fallout from high HIV/Aids infection rates in the workforce — is a problem for some companies.
  • The domestic market has shrunk rapidly over the past five years, in terms of numbers of consumers and disposable income.
  • Deteriorating living conditions have forced people to become self-sufficient. Many use borehole water, run generators to counter power cuts and import their own fuel where possible. Ongoing fuel shortages, in particular, have hit business hard.
  • The lack of equity in the local market for partners in Zimbabwe to take up stakes in South African-owned or run companies is proving to be a problem in an environment where there is increasing pressure for indigenisation.
  • While corruption was not high on the list of problems mentioned by companies, some businesspeople said it had become a factor in doing business in Zimbabwe, particularly with regard to companies linked to government officials.
  • Extract from Dianna Games’s Nation in Turmoil, part of the South African Institute of International Affairs’s Business in Africa research project

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